Rupee hits fresh low on foreign outflows

(Colombo) REUTERS: The Sri Lankan rupee touched a record low of 160.65 per dollar yesterday as importer dollar demand and foreign outflows from government securities weighed on the currency, dealers said.

The rupee hit 160.65 earlier in the trade, before closing at 160.60/70, compared with Monday’s close of 160.50/70. It surpassed a record low of 160.60 hit in the previous session. The currency has declined 4.6 percent so far this year.

Dealers said some importers bought dollar ahead of a public holiday on Wednesday, while the absence of dollar conversions by exporters and outflows from equities pushed the rupee down.

The markets will be closed today to observe Hajj festival.

Sri Lanka’s stock market has suffered an outflow of Rs.888.8 million (US$5.5 million) in the last five sessions through yesterday.

Exporters are holding on to U.S. dollars as they expect the local currency to decline further, dealers said.

The dollar fell for a fourth consecutive session yesterday in its worst spell since March after critical comments from U.S. President Donald Trump about the Federal Reserve.

Trump said on Monday that he was “not thrilled” with the Federal Reserve under his own appointee, Chairman Jerome Powell, for raising interest rates and said the U.S. Central Bank should do more to help him to boost the economy.

The Sri Lankan currency is also hit by the declines in the Indian rupee, as India is Sri Lanka’s biggest trading partner. Indian rupee is the region’s worst performing currency this year, and hit a record low on Thursday.

Sri Lanka’s Central Bank Governor, Indrajit Coomaraswamy told reporters after holding key monetary policy rates steady that several emerging market currencies had declined more than the Lankan rupee, adding that “if we reduce rates that would put further pressure on the exchange rate”.

Foreign investors sold government securities worth a net Rs.818 million (US$5.10 million)in the week ended Aug. 15, bringing the outflow so far this year to Rs.3.99 billion, Central Bank data showed.